Construction market overview: April

At the end of March the Government Construction Strategy 2016 – 20 was released. The strategy presents ideas on improving efficiencies and increasing productivity in government construction, to deliver £1.7 billion efficiencies and support 20,000 apprenticeships. It is hoped increased productivity will support government to deliver the £163 billion of planned projects identified in the spring 2016 Government Construction Pipeline.

The ONS have released their Output in the Construction Industry February 2016 figures. Output decreased by 0.3% in February compared to January 2016, with all new work decreasing by 0.2% and repair and maintenance also decreasing by 0.5%. However compared to February 2015 output is seen to have increased by 0.3%.

The Construction Products Association’s latest State of the Trade Survey shows continued sales growth in Q1 2016 as sales of construction products increased for the 12th consecutive quarter. However manufacturers’ optimism is showing signs of decreasing due to uncertainty surrounding the EU referendum in June. The CPA has also released their construction forecasts for spring 2016, these bring a downward revision for growth in construction output, from the forecast three months ago. This again is due to the impacts of uncertainty from the EU referendums and also heightened concerns regarding the effects of global economic growth prospects.

New forecasts from Leading Edge expect infrastructure construction to outpace public sector work as the Government creates issues for public work and Hinkley looks like it will finally progress. By the end of this forecast period it is expected that infrastructure output will be 83% higher than public housing / public other and new work combined.

Barbour ABI’s latest Economic & Construction Market Review shows that construction contracts awarded increased by 4.2% in February 2016 compared to January, and this is an 11.6% increase on the value recorded in February 2015. The region with the largest number of contracts awarded in February 2016 was the East of England, followed by London and the North West.

The government National Infrastructure Pipeline 2016 details investment in over 600 infrastructure projects and programmes in all sectors across the UK. The Pipeline gives an overview of what, when and where infrastructure will be built. £300 billion is to be invested in the coming five years. The accompanying National Infrastructure Delivery Plan 2016 to 2021, that sets out the strategy for improved infrastructure delivery, is the first to detail how infrastructure will support large-scale housing, regeneration and key social infrastructure.

The Markit/CIPS UK Construction PMI shows residential activity expanding at its slowest pace for over three years. The index registered 54.2 in March 2016, unchanged from February 2016. The index has registered above the neutral value of 50.0 for the 35th month running. Indicating March 2016 is the slowest rate of output growth since June 2013.

The Nationwide House Price Index reports that in March 2016 house prices increased by 0.8%, with annual house price growth increasing to 5.7%. The Halifax House Price Index reports that in March 2016 house prices increased by 2.6%, and house prices in the last 3 months (January to March) were 2.9% higher than the preceding 3 months. They also report that annual house prices grew from 9.7% to 10.1% in March 2016.

Arcadis has identified that the number of ‘prime’ homes due to be constructed in London over the next 10 years will reach over 35,000, which is a 40% increase on 2014. This growth on the previous year demonstrates the extent to which the capital’s high-end residential market is still viewed favourably despite the rapidly evolving UK housing market.

L&Q, The Hyde Group and East Thames have entered into merger talks with a view to creating one of the country’s top four largest house builders. This new organisation will aim deliver 100,000 new homes, making a real difference to the housing crisis in London and the South East, this is 35,000 more homes than any of these organisations could have achieved alone.